BITCOIN

Aegis

Scottex99 said:

Aegis said:

Scottex99 said:

How is that different to gold or stocks, aside from dividends and “gold can be used to make watches”

I don’t think it’s zero sum at all. 

I’ve bought at every possible price between $3k and $60k.

I bought at ~$17k in Jan this year when whoever was on the other side was happy to sell to me.

And I’ll sell sometime next year, hopefully in the $60-80k range. When someone will happily buy too.

its a free market, nobody that got in super early needs to convince people to push the price up, the market, hard money and economics does that job well enough 

If that was a serious question, you really aren't an informed investor.  Stocks are fractional ownerships of companies, which means that in the event that the shares are wound up, the shareholders are entitled to a proportion of the company's underlying assets.  At the same time, the ownership also gives access to a proportion of the profit that the company makes, whether distributed as a dividend or reinvested into the company for future growth. Doesn't matter which of those happens, the idea is the same: the company's activity brings in funds from external sources in exchange for the goods or services that the company provides.  As such, if the company has a good business model or good potential, that's the reason to expect the value of the company to go up.

That's not even remotely comparable to what happens with commodities like gold.  In the case of gold, someone buys it and it does nothing.  The hope is that the scarcity coupled with the utility (it's pretty and it's also a very good conductor) means that someone will eventually want to pay more for your gold than you bought it for.

With bitcoin, you have a system set up like commodities, but missing the utility. On its own, scarcity really doesn't matter, and eventually people will realise that. Based on what I am seeing in terms of the number of people who are getting more aware of what crypto is and how many scams there are in the sector, I'd be really surprised if you achieved $60-80k next year.  But hey, it's all based on completely irrational sentiment, so who knows?

You're right, the majority of my experience is with crypto and not with S&S, although I'm still old enough to have some Funds on HL etc.

But that doesn't make it zero-sum, except that the potential utility is more conceptual and is going to be for a while when the whole asset class is barely 15 years old.

Scarcity will matter if central banks keep printing billions in a never ending cycle of debt and inflation. 

And scams I would say are irrelevant, like there isn't scams in banking or even in huge global companies. Enron etc. Scams are prevalent because it's new and people are fairly clueless. I opened my junk mail personal email yesterday and had multiple Nigerian Prince, Lottery wins etc. Nobody would fall for that these days but they might just fall for some investment scam promising 2% return a week for "Forex Bitcoin Super Algo Trading" because people might think hmmm BTC did go from $1 to $50k.....

Unless you can identify how it is positive sum, it's zero sum. That's just how maths works - essentially it's stating that the only money coming into the system is what people pay in to buy the assets. In terms of utility, the idea of saying "well, it might do something useful in future" just means that it isn't doing anything now, therefore it has no utility now. Even with the best will in the world, there's no way to imagine that a bitcoin will actually be useful for something in future because the functionality would need to be there now.

As such, that leaves wishful thinking and the scams, and explaining why the scams are prevalent doesn't make them go away or give any additional protection.  As a comparison, I had an ISA with Kaupthing Edge back in 2008.  Kaupthing went bust and took my money with it.  I was protected by the Financial Services Compensation Scheme in full because it was a recognised bank and I had no reasonable way of predicting in advance that the bank itself would go bust.  The recognition here was that banks and investment platforms are an integral foundation of a functioning financial services industry, and it is really telling that the same protection has not been extended to crypto exchanges.

Honestly, keep trading bitcoin if it makes you happy, just stay very aware of the fact that by any long-term definition, it's not an investment.

Malthusian

Scottex99 said:

Scarcity will matter if central banks keep printing billions in a never ending cycle of debt and inflation. 

No it won't. The Bank of England and the Fed could turn on the printing press and double the amount of dollars and pounds in existence overnight, which ceteris paribus would cause the price of Bitcoin in dirty fiat to jump to $80,000 / £80,000 or whatever. After you offramped your Bitcoin into dirty fiat, you would have twice as much fiat as before but it would buy half as much actual stuff, leaving you in the same position (not rich).

Central bank money printing isn't enough to make hodlers rich. People have to be willing to hand over increasing amounts of actual goods and services in exchange for Bitcoin. Which means they have to want to buy Bitcoins specifically in larger numbers, in order to make early adopters rich. And not, say, property, or company shares, or þe olde golde bullion, or literally anything else that can hold its value when cash is depreciated and that people have historically tended to buy when they wanted to preserve the value of their savings. 

How long can Bitcoin bimble along, still miles off the price the largest cohort bought at, becoming increasingly associated with scams and ransomware, without losing its status as the safe haven to which people will one day flee?

(We'll leave aside the whole question of why it is bad for central banks to create pounds and dollars to maintain the money supply but OK for Tether to create stabledollars out of thin air to buy Bitcoins with.)

Cus

Scottex99 said:

boingy said:

Comparing Bitcoin with shares is not a sensible approach.
You should compare Bitcoin with other, more traditional, currencies. People invest in Dollars, Pounds and Euros. Just like Bitcoin, none of those things are real.

Anyhow, I'm just glad to get my Bitcoin money back. Too volatile for my liking.

I don't know why crypto triggers such strong responses in people. 

Good for you, everyone is here to try to make money from their investments.

It creates such strong responses because it’s nascent, the White Paper for Bitcoin is 15 years old.

Typically older people don’t trust it as they can’t understand it and younger people see it as a type of digital gold: store of value, democratised hardest form of money that cannot be inflated away like fiat money can (and has).

We all know big bankers can’t be trusted to look after the average person, the same as the majority of politicians. Jamie Dimon just came out this week saying he hates Bitcoin and no doubt gave some Terrorist Financing, Money Laundering reason for it, ironic given what his bank has paid in fines for doing the exact same thing.

It is very volatile and speculative, I personally find it fun.

If you want to hold bonds or very low risk funds, then go ahead. If you want to throw £500 at some super risky altcoin then do that too. We all know to max out our ISAs, invest in sensible baskets of stocks that return 10-12% per year and over decades we can retire comfortably - but

A lot of young people today don’t have that choice and they are looking for alternatives. If there is some great reset coming in whatever form, crypto MAY be a way to front run it.

Your comment on young people is interesting.  The feeling of a lack of choice. Why can't a young person invest in sensible stocks for 30/40 years and then retire?

MeteredOut

Cus said:

Scottex99 said:

boingy said:

Comparing Bitcoin with shares is not a sensible approach.
You should compare Bitcoin with other, more traditional, currencies. People invest in Dollars, Pounds and Euros. Just like Bitcoin, none of those things are real.

Anyhow, I'm just glad to get my Bitcoin money back. Too volatile for my liking.

I don't know why crypto triggers such strong responses in people. 

Good for you, everyone is here to try to make money from their investments.

It creates such strong responses because it’s nascent, the White Paper for Bitcoin is 15 years old.

Typically older people don’t trust it as they can’t understand it and younger people see it as a type of digital gold: store of value, democratised hardest form of money that cannot be inflated away like fiat money can (and has).

We all know big bankers can’t be trusted to look after the average person, the same as the majority of politicians. Jamie Dimon just came out this week saying he hates Bitcoin and no doubt gave some Terrorist Financing, Money Laundering reason for it, ironic given what his bank has paid in fines for doing the exact same thing.

It is very volatile and speculative, I personally find it fun.

If you want to hold bonds or very low risk funds, then go ahead. If you want to throw £500 at some super risky altcoin then do that too. We all know to max out our ISAs, invest in sensible baskets of stocks that return 10-12% per year and over decades we can retire comfortably - but

A lot of young people today don’t have that choice and they are looking for alternatives. If there is some great reset coming in whatever form, crypto MAY be a way to front run it.

Your comment on young people is interesting.  The feeling of a lack of choice. Why can't a young person invest in sensible stocks for 30/40 years and then retire?

Because no-one on TikTok makes money from telling them to do so.

The reference to "the great reset" says a lot.

But perhaps I'm cynical

RichTips

Aegis said:

Scottex99 said:

Aegis said:

Scottex99 said:

How is that different to gold or stocks, aside from dividends and “gold can be used to make watches”

I don’t think it’s zero sum at all. 

I’ve bought at every possible price between $3k and $60k.

I bought at ~$17k in Jan this year when whoever was on the other side was happy to sell to me.

And I’ll sell sometime next year, hopefully in the $60-80k range. When someone will happily buy too.

its a free market, nobody that got in super early needs to convince people to push the price up, the market, hard money and economics does that job well enough 

If that was a serious question, you really aren't an informed investor.  Stocks are fractional ownerships of companies, which means that in the event that the shares are wound up, the shareholders are entitled to a proportion of the company's underlying assets.  At the same time, the ownership also gives access to a proportion of the profit that the company makes, whether distributed as a dividend or reinvested into the company for future growth. Doesn't matter which of those happens, the idea is the same: the company's activity brings in funds from external sources in exchange for the goods or services that the company provides.  As such, if the company has a good business model or good potential, that's the reason to expect the value of the company to go up.

That's not even remotely comparable to what happens with commodities like gold.  In the case of gold, someone buys it and it does nothing.  The hope is that the scarcity coupled with the utility (it's pretty and it's also a very good conductor) means that someone will eventually want to pay more for your gold than you bought it for.

With bitcoin, you have a system set up like commodities, but missing the utility. On its own, scarcity really doesn't matter, and eventually people will realise that. Based on what I am seeing in terms of the number of people who are getting more aware of what crypto is and how many scams there are in the sector, I'd be really surprised if you achieved $60-80k next year.  But hey, it's all based on completely irrational sentiment, so who knows?

You're right, the majority of my experience is with crypto and not with S&S, although I'm still old enough to have some Funds on HL etc.

But that doesn't make it zero-sum, except that the potential utility is more conceptual and is going to be for a while when the whole asset class is barely 15 years old.

Scarcity will matter if central banks keep printing billions in a never ending cycle of debt and inflation. 

And scams I would say are irrelevant, like there isn't scams in banking or even in huge global companies. Enron etc. Scams are prevalent because it's new and people are fairly clueless. I opened my junk mail personal email yesterday and had multiple Nigerian Prince, Lottery wins etc. Nobody would fall for that these days but they might just fall for some investment scam promising 2% return a week for "Forex Bitcoin Super Algo Trading" because people might think hmmm BTC did go from $1 to $50k.....

Unless you can identify how it is positive sum, it's zero sum. That's just how maths works - essentially it's stating that the only money coming into the system is what people pay in to buy the assets. In terms of utility, the idea of saying "well, it might do something useful in future" just means that it isn't doing anything now, therefore it has no utility now. Even with the best will in the world, there's no way to imagine that a bitcoin will actually be useful for something in future because the functionality would need to be there now.

As such, that leaves wishful thinking and the scams, and explaining why the scams are prevalent doesn't make them go away or give any additional protection.  As a comparison, I had an ISA with Kaupthing Edge back in 2008.  Kaupthing went bust and took my money with it.  I was protected by the Financial Services Compensation Scheme in full because it was a recognised bank and I had no reasonable way of predicting in advance that the bank itself would go bust.  The recognition here was that banks and investment platforms are an integral foundation of a functioning financial services industry, and it is really telling that the same protection has not been extended to crypto exchanges.

Honestly, keep trading bitcoin if it makes you happy, just stay very aware of the fact that by any long-term definition, it's not an investment.

I'll have a crack at demonstrating some kind of utility by way of a reductionist example, which I hope you'll entertain and acknowledge as such:

Imagine the Bitcoin network only ever consisted of two people. The creator and a solitary buyer. The creator lives in the USA, while the solitary buyer lives in the UK. Shortly after creating the network in, let's say, December of 2009, the creator agrees to sell 10 Bitcoin to this solitary buyer in the UK. He asks for $100 in total. The buyer digs out £64, converts it into USD and pays the creator $100 for the 10 Bitcoin. Everyone is happy.

Now fast forward to today. The creator remembers that Bitcoin thing he created years ago and suddenly develops nostalgia-fueld sellers remorse. He asks if he can have the 10 Bitcoin back. He offers to return the $100. Afterall, he never actually got around to spending it anyway. The buyer agrees, and accepts ten crisp ten-dollar bills. The buyer then takes this $100 to his bank, where he is pleasantly surprised to discover it is now worth £80. He is happy to have had this positive experience of avoiding the devaluation of his fiat currency relative to some other fiat currency. The creator is happy because he got his 10 Bitcoin back.

One could scale this example up and add further details (such as the technical explanation behind the fixity of the supply relative to the two units of currency mentioned), but it might get a bit long winded.

Malthusian

RichTips said:

Now fast forward to today. The creator remembers that Bitcoin thing he created years ago and suddenly develops nostalgia-fueld sellers remorse. He asks if he can have the 10 Bitcoin back. He offers to return the $100. Afterall, he never actually got around to spending it anyway. The buyer agrees, and accepts ten crisp ten-dollar bills. The buyer then takes this $100 to his bank, where he is pleasantly surprised to discover it is now worth £80. He is happy to have had this positive experience of avoiding the devaluation of his fiat currency relative to some other fiat currency. The creator is happy because he got his 10 Bitcoin back.

So the net result is the creator ends up with nothing (got $100, gave away $100) in exchange for his wasted effort and electricity spent selling and rebuying some spreadsheet cells. 

The buyer ends up with the same result as if he'd just bought $100 worth of crisp ten dollar bills in 2009. This gain in £ is not attributable to Bitcoin, it is attributable to the appreciation of the dollar vs the pound, and the poor negotiation skills of the creator (who could probably have offered less than $100 as the buyer would probably have been happy to get his £64 back).

Ignoring the fluctuations in £ vs $, which are completely irrelevant to the utility of Bitcoin (otherwise I could sell someone my eye bogeys for £100, put the £100 in VLS100 and claim that my eye bogeys return 8% a year), he gave away $100 and got $100 back, leaving him with nothing. Plus the buyer paid an opportunity cost of 14 years' worth of potential gain on his £64.

This proves that Bitcoin is a positive sum game. Have I got that right?

I love reductionist arguments, in case you hadn't guessed.

User232002

Aegis said:

Unless you can identify how it is positive sum, it's zero sum. 

A global, decentralised, trustless, permissionless financial system, outside the control of a single person, whose monetary policy is determined by code and game theoretic incentives creates value, just as companies do. Hard money is the foundational rock of a strong economic system. Without it, there is no incentive to overproduce and therefore no abundance.

Aegis said:

In terms of utility, the idea of saying "well, it might do something useful in future" just means that it isn't doing anything now, therefore it has no utility now. Even with the best will in the world, there's no way to imagine that a bitcoin will actually be useful for something in future because the functionality would need to be there now.

Completely incorrect. This isn't how you value networks.

Its also just an incorrect line of argument in general. The market is probabilistic and forward looking.

Aegis said:

As a comparison, I had an ISA with Kaupthing Edge back in 2008.  Kaupthing went bust and took my money with it.  I was protected by the Financial Services Compensation Scheme in full because it was a recognised bank and I had no reasonable way of predicting in advance that the bank itself would go bust.  

Banks are a duration business. They are all currently underwater due to this (and their horrible inefficiencies). How much is that FSCS protection worth if all customers realised this and asked for their deposits back?

Malthusian said:

No it won't. The Bank of England and the Fed could turn on the printing press and double the amount of dollars and pounds in existence overnight, which ceteris paribus would cause the price of Bitcoin in dirty fiat to jump to $80,000 / £80,000 or whatever. After you offramped your Bitcoin into dirty fiat, you would have twice as much fiat as before but it would buy half as much actual stuff, leaving you in the same position (not rich).

Actually, you'd have twice as much money but it would buy exactly the same amount of goods. Which is the point, because the old lady that had $40,000 in her account when the printer was turned on can now only buy half as much.

Money printing favours those near to the printer, those with assets and those that wish to take on debt, at the expense of economically responsible people, ie. savers and economically productive people, ie. Labour. 

Malthusian said:

Central bank money printing isn't enough to make hodlers rich. People have to be willing to hand over increasing amounts of actual goods and services in exchange for Bitcoin. Which means they have to want to buy Bitcoins specifically in larger numbers, in order to make early adopters rich. 

You mean, like this?




But, you're missing the point anyway. There's a great story in 'When Money Dies,' about an old lady in a bank in Austria in the early 1920's. The bank manager informs her that she can trade her Austrian Krone in for gold, pounds or dollars. She says she will think about it. She returns some time later and asks to proceed with the trade. The bank manager tells her that nobody will accept the Krone anymore.

Malthusian said:

And not, say, property, or company shares, or þe olde golde bullion, or literally anything else that can hold its value when cash is depreciated and that people have historically tended to buy when they wanted to preserve the value of their savings. 

Property being a 'store of value' and a place to park your excess savings has caused the housing crisis in this country over the last 3 decades. Gold bullion was confiscated from its citizens by the US government in 1933.

Neither are as fool proof as you would believe. Both showcase the degradation of fiat. A pure financial asset that holds its value is needed rather than subverting the purpose of other assets.

Malthusian said:

How long can Bitcoin bimble along, still miles off the price the largest cohort bought at, becoming increasingly associated with scams and ransomware, without losing its status as the safe haven to which people will one day flee?

The only people that are down are those that bought at about 50k and upwards and continued to buy as the price increased. As was pointed out, if you chose to start buying at the exact Bitcoin top of $69k and continued to do so, you would now be up very healthily on your investment.

The bitcoin price on 24th November 2020, the day this thread was started, was $18,000. It continues to outperform everything, and the window of days when you could conceivably have bought Bitcoin and be 'down' continue to dwindle. 

"I believe that crypto will play that role, as a flight to quality."
Larry Fink; 16th October 2023

Malthusian said:

(We'll leave aside the whole question of why it is bad for central banks to create pounds and dollars to maintain the money supply but OK for Tether to create stabledollars out of thin air to buy Bitcoins with.)

If you genuinely think Tether is an unbacked currency, then short it.

Tether is a stable coin; it doesn't go up in value, so shorting it has no blow out risk. You can cash out the tether from the crypto ecosystem in to real USD and hold it in your bank, so you have no counter party risk. You have no cost apart from your cost of carry, which is 4 - 7%. At that rate, you've got 10 years and probably more like 15 for your play to come off. You talk like Bitcoin won't even be around then, never mind a USD fugazi scheme which US regulators have already seen in to their books as part of a settlement.

Thus, your above quoted statement is either (1) poppycock, or (2) a genuinely held belief, but you lack any type of execution ability at all. Either way, it doesn't reflect well on your financial acumen.

Linton

darren232002 said:

Aegis said:

Unless you can identify how it is positive sum, it's zero sum. 

A global, decentralised, trustless, permissionless financial system, outside the control of a single person, whose monetary policy is determined by code and game theoretic incentives creates value, just as companies do. Hard money is the foundational rock of a strong economic system. Without it, there is no incentive to overproduce and therefore no abundance.

Aegis said:

In terms of utility, the idea of saying "well, it might do something useful in future" just means that it isn't doing anything now, therefore it has no utility now. Even with the best will in the world, there's no way to imagine that a bitcoin will actually be useful for something in future because the functionality would need to be there now."ut8ility" 

Completely incorrect. This isn't how you value networks.

I dont have the time or energy to answer all your misaconceptions but this one is easy.....

Yes a money transfer system generates value.  We have remarkably effective global ones in operation at the moment run by companies who offer their shares on the stock market.  I can invest in those companies now to receive some of those profits in the form of dividends in the short term or see my holdings increase in underlying value by their profits being reinvested.

But to do this one invests by owning part of the network company, not in the stuff being transferred.  Buying more $s because companies make profits by moving $s around the world makes no sense whatsoever.

RichTips

Malthusian said:

RichTips said:

Now fast forward to today. The creator remembers that Bitcoin thing he created years ago and suddenly develops nostalgia-fueld sellers remorse. He asks if he can have the 10 Bitcoin back. He offers to return the $100. Afterall, he never actually got around to spending it anyway. The buyer agrees, and accepts ten crisp ten-dollar bills. The buyer then takes this $100 to his bank, where he is pleasantly surprised to discover it is now worth £80. He is happy to have had this positive experience of avoiding the devaluation of his fiat currency relative to some other fiat currency. The creator is happy because he got his 10 Bitcoin back.

So the net result is the creator ends up with nothing (got $100, gave away $100) in exchange for his wasted effort and electricity spent selling and rebuying some spreadsheet cells. 

The buyer ends up with the same result as if he'd just bought $100 worth of crisp ten dollar bills in 2009. This gain in £ is not attributable to Bitcoin, it is attributable to the appreciation of the dollar vs the pound, and the poor negotiation skills of the creator (who could probably have offered less than $100 as the buyer would probably have been happy to get his £64 back).

Ignoring the fluctuations in £ vs $, which are completely irrelevant to the utility of Bitcoin (otherwise I could sell someone my eye bogeys for £100, put the £100 in VLS100 and claim that my eye bogeys return 8% a year), he gave away $100 and got $100 back, leaving him with nothing. Plus the buyer paid an opportunity cost of 14 years' worth of potential gain on his £64.

This proves that Bitcoin is a positive sum game. Have I got that right?

I love reductionist arguments, in case you hadn't guessed.

Rather than deliberate this with you in finer detail, Malthusian (despite your evident love of spreadsheet cell price-incorportating reductionist arguments), I'll just leave the post for others to consider.

In respect to you in particular, it's satisfying for me to simply remind you that when you disparaged me as a "bagholder" back in May of 2020 following my first ever post, the price of Bitcoin was £7,200. For all your derision, it's never dropped below that price in the three and a half years since then and currently sits at £33,000. In light of this, forgive me if I'm a little dismissive of your contributions to these Bitcoin/cryptocurrency threads.

zagfles

RichTips said:

Malthusian said:

RichTips said:

Now fast forward to today. The creator remembers that Bitcoin thing he created years ago and suddenly develops nostalgia-fueld sellers remorse. He asks if he can have the 10 Bitcoin back. He offers to return the $100. Afterall, he never actually got around to spending it anyway. The buyer agrees, and accepts ten crisp ten-dollar bills. The buyer then takes this $100 to his bank, where he is pleasantly surprised to discover it is now worth £80. He is happy to have had this positive experience of avoiding the devaluation of his fiat currency relative to some other fiat currency. The creator is happy because he got his 10 Bitcoin back.

So the net result is the creator ends up with nothing (got $100, gave away $100) in exchange for his wasted effort and electricity spent selling and rebuying some spreadsheet cells. 

The buyer ends up with the same result as if he'd just bought $100 worth of crisp ten dollar bills in 2009. This gain in £ is not attributable to Bitcoin, it is attributable to the appreciation of the dollar vs the pound, and the poor negotiation skills of the creator (who could probably have offered less than $100 as the buyer would probably have been happy to get his £64 back).

Ignoring the fluctuations in £ vs $, which are completely irrelevant to the utility of Bitcoin (otherwise I could sell someone my eye bogeys for £100, put the £100 in VLS100 and claim that my eye bogeys return 8% a year), he gave away $100 and got $100 back, leaving him with nothing. Plus the buyer paid an opportunity cost of 14 years' worth of potential gain on his £64.

This proves that Bitcoin is a positive sum game. Have I got that right?

I love reductionist arguments, in case you hadn't guessed.

Rather than deliberate this with you in finer detail, Malthusian (despite your evident love of spreadsheet cell price-incorportating reductionist arguments), I'll just leave the post for others to consider.

In respect to you in particular, it's satisfying for me to simply remind you that when you disparaged me as a "bagholder" back in May of 2020 following my first ever post, the price of Bitcoin was £7,200. For all your derision, it's never dropped below that price in the three and a half years since then and currently sits at £33,000. In light of this, forgive me if I'm a little dismissive of your contributions to these Bitcoin/cryptocurrency threads.

I had to google that

Seriously though, looking at Bitcoin prices going back whole years from now (to avoid selectively picking peaks or troughs):

3 years ago £14k

2 years ago £37k

1 year ago £13k

Now £33k

So what is it? A currency? No chance, not yet anyway. You can't possibly use a currency that's so unstable.

An investment? One that could almost treble its value in a year or lose nearly two thirds of its value! In just a year.

Nah, that's not an investment, that's a gamble. Individual shares could of course do the same but putting significant amounts into individual shares is also a gamble.

Good luck if you want a gamble. Personally I want a currency, or an investment. I'll go down the casino if I want a gamble!